* Spanish bank audit, French budget in focus * U.S. data pushes stock markets lower NEW YORK, Sept 28 (Reuters) - Stocks fell and Spain's borrowing costs rose back above 6 percent on Friday, as initial optimism on Madrid's new debt cutting plans gave way to anxiety over its troubled banks, France's finances and faltering global growth. A report showing business activity in the U.S. Midwest contracted this month for the first time since September 2009, as new orders sank, added to pessimism [ID:nN9E8KD077} [ID:nL1E8KS5BX} and prompted losses in U.S. stocks to extend and the dollar to pare losses against the euro. Stocks around the world, as measured by a MSCI index , were down 0.5 percent. Madrid's IBEX led the falls, down 1.2 percent, as the early lift from Spain's new round of spending cuts, which had also boosted U.S. and Asian markets overnight, collapsed. "On this last day of the quarter, the focus remains on the situation in Europe, which is causing nervousness," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. The Dow Jones industrial average was down 105.27 points, or 0.78 percent, at 13,380.70. The Standard & Poor's 500 Index was down 9.44 points, or 0.65 percent, at 1,437.71. The Nasdaq Composite Index was down 18.82 points, or 0.60 percent, at 3,117.78. Despite Friday's losses, the S&P has advanced around 5.5 percent over the past three months. Spain will remain in focus, analysts said, with the results of an independent audit of the country's banks to be published later in the day, while Moody's Investors Service is expected to finish a rating review which may cost Madrid its sovereign investment grade status. The 10-year Spanish bond last yielded 5.98 percent with the peak at 6.079 percent. France is also under the microscope with President Francois Hollande's fiscal credibility on the line. His first annual budget, France's toughest in 30 years, raised taxes to bring in 30 billion euros ($39 billion) to keep deficit-cutting promises. The single currency, fell 0.1 percent to $1.2896 as risk aversion rose. The benchmark 10-year U.S. Treasury note was up 12/32, with the yield at 1.6129 percent after the U.S. data. "We had been seeing good data recently, but now we seem to be following the slowdown in China and Europe and we're seeing weakness," said Paul Nolte, managing director at Dearborn Partners in Chicago.